The U.K. Financial Conduct Authority is seeking input from retirement plan providers, money managers and advisers on its proposed rules to compel defined contribution plans' independent governance committees to disclose costs and fees to plan participants on an ongoing basis.
In an effort to improve the quality of information available to participants in workplace plans, the FCA wants contract-based DC plans to provide information about some or all of the transaction costs and administration fees to participants and their spouses or civil partners.
Current rules require firms that hold information about transaction costs and administration fees such as managers or record keepers to disclose the information on request to the providers of workplace retirement plans.
A market study by the U.K. Office of Fair Trading launched in 2013 found that the DC market was weak as participants relied on employers to make key decisions and that due to the complexity of the DC plans, it was difficult to assess costs and quality, and outcomes.
However, "Markets in Financial Instruments Directive II and Packaged Retail and Insurance-based Investment Products Regulation brought enormous change to how firms operate and the information they are required to give their customers," said Andrew Bailey, CEO of the FCA, in a news release. "While awareness of the rules appears good, we found that firms take inconsistent approaches, risking confusion for customers, who may be misled about how much they are being charged."
Since Jan. 3, 2018, money managers have been obligated to report transaction costs and other fees to trustees in trust-based DC plans in the U.K.
The FCA said Thursday it found that most of the money managers in its review calculate transaction costs according to the relevant rules and there was a good level of compliance regarding the documents firms are required to provide to plan executives.
But Mr. Bailey added: "Certain aspects surrounding compliance with PRIIPs may risk not leading to good consumer outcomes, and we are working with EU institutions to address these. We are aware that many firms are finding aspects of the calculations difficult or are making inaccurate calculations. We will work with firms to help them ensure their reporting is accurate."
The consultation period ends May 28. Feedback should be submitted via the FCA website.